GM Korea's main shareholders, General Motors (GM) of the USA and the local state-run Korea Development Bank (KDB), signed a conditional agreement at the end of last week to provide fresh funds to the insolvent carmaker.

This followed an agreement reached earlier that week with union workers over redundancies and the relocation of workers. The US parent company had earlier said union backing for its restructuring plan was essential for any fresh funding to be made available.

The restructuring plan involves the closure of one of the company's four vehicle assembly plants in the country by the end of May and cost cutting of up to US$500m per year. 

A final funding deal is expected to be signed next month, allowing GM Korea to meet its substantial obligations to suppliers, workers and creditors, and thus avoid bankruptcy.

The company posted cumulative net losses of KRW3.134 trillion (US$2.94bn) in the three years to the end of 2017 due to falling domestic and overseas sales and high costs.

GM Korea's shareholders agreed to inject a combined KRW7.7 trillion (US$7.2bn) of fresh funds into the company with the largest shareholder, General Motors, with China's SAIC providing KRW6.9 trillion and KDB the remaining KRW800bn. 

GM owns 77% of GM Korea's equity, SAIC Motor a further 6% while KDB owns the remaining 17%. 

GM has also agreed to allocate two new vehicle models to its South Korean subsidiary - a new SUV and a new crossover vehicle in 2019 and 2022 respectively - and ensure continued operations for at least 10 years.

To help fight rising domestic competition from Hyundai and Kia, GM Korea will import the Chevrolet Equinox SUV from the US from June. 

After the closure of the Gunsan plant in May, GM Korea will have a production capacity of 500,000 vehicles per year at its three remaining plants. Output is not expected to exceed 440,000 units per year in the next three years, however.

General Motors' chief financial officer Chuck Stevens said the new funding agreement is expected to help return GM Korea to profit next year.